Derivatives

Forward Rate Bias

March 19, 2021
Derivatives

Debit Spread

March 19, 2021

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A spread option position whereby the price of the option purchased (long option) exceeds the price of the option sold (short option). The front spread is created when an investor buys an option with a higher price (premium) and simultaneously sells an option with a lower price (premium). Whether calls or puts are used, the net front is always equal to the difference in premiums.

It is also known as a debit spread.

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